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EMEA 2008 Supply Chain Top 10 PredictionsFebruary 19, 2008
Pier Manenti | EMEA Research Director | IDC Manufacturing Insights
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 2
� Leading provider of fact-based market research, custom research and strategicadvisory services
� Focus on the strategic business application of information technologies for manufacturing companies
� Provide unique insights on how to improve business processes through the use of technology
� Cross the gap between IT and business
About Manufacturing Insights
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 3
Today’s Webcast is based on ..
� European Supply Chain strategies
� Recent and forthcoming papers:– Collaboration and Fast Decision-Making
Processes Key to Survival in the Manufacturing Industry
– European Supply Chain Innovation: responsiveness through collaboration
– Involving the Supply Chain in NPDI Changes Innovation from a Process to a Strategy
– Supply Chain Management Applications: Vendor Assessment and Review
– Industry Short Lists
� MES – Manufacturing Execution
� Inventory Optimization
– Low-cost manufacturing strategies
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 4
Why Predictions?
� Goal: Identify major trends that impact manufacturing enterprises’ supply chain processes and technologies. Preview the MI research agenda.
� Bias: We focus on the transformation of major supply chain processes and how IT enables that transformation.
� Process: Drawn from IDC and Manufacturing Insights studies, survey results, end-user interviews, and our own industry experience.
� Time frame: Predictions are focused on 2008, but will have a long range impact.
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 5
Situation Overview
� As we enter 2008, several factors threaten business expectations
� Globalization has led to an extreme shift in European corporate strategies
– Globalization of economies has favored the opening of new emerging markets bringing on a new kind of competition from low cost countries focused on price cuts
� The rising of global demand– Emerging markets over low-cost countries
– Emerging markets contribution: heightening global demand due to economic growth and an emerging middle-class
� Primary business objective– Manufactures must find a way of differentiating from the competition by improving
levels of customer service and product quality
– Balance supply chain efficiencies with responsiveness
� Supply Chain IT investments– Back to basics: more execution than planning
– Key technologies: SRM, Supply Chain executions, Analytics and visibility
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 6
#1 Real Time Manufacturing Execution Comes First
To take home
Inevitable Link Between Levels of Supply Chain Agility and Real-time Manufacturing
� Agile manufacturing process
− Gain visibility into manufacturing execution
– Ability to quickly change the production schedule according to signs of changing demand
– Both in-house and outsourced operation
� Real-Time Manufacturing Requires a Rejuvenation Process
− Investments in plant equipment and technologies
− Process improvement initiatives: lean, six sigma, SCOR
� MES Technologies Are Back on Top
– IDC Manufacturing Insights anticipates a strong and steady demand of MES replacement
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 7
� Supply Chain visibility
– Responsiveness through collaboration
– Agility helps companies fulfil the ultimate aim of improving customer satisfaction
� Being agile comes out on top over being demand-driven
– In a 2007 survey, more than 50% of respondent ranked being demand-driven lower that third place in terms of impact on supply chain performance
� Supplier relationship management is topping IT investments priority
– Technology investments priorities support increased collaboration with suppliers
#2 Agility: Getting More Responsive Through Collaboration
To take home
European manufacturers have relegated the notion of being demand-driven, preferring instead to be agile
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 8
� Sense and shape demand goes hand in hand with supply chain agility
– Demand forecast - European companies will continue to forecast their market demand
− Demand visibility – To develop optimal products, pricing and promotional strategies
− Not only true for consumer industries but also for non-consumer goods firms and suppliers
� Investments in demand management and analytics solutions will continue in 2008
� Effective Fulfilment of Demand Will Rely on Advanced Inventory Level Optimization
#3 Demand Variability Calls for Broader Visibility and Inventory Optimization
To take home
Increasingly fluctuating demand variability is an inherent feature of today’s global economy: companies can grow more profitable by better sensing demand
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 9
� The growing cost of “low-cost” manufacturing
− More complex supply chains with long lead times
− Communicating challenges: different time zones, languages, cultural norms
− Significant increase in labour and transportation costs
� The rise of the Supply Chain Risk Officer
– International or local events
– Product quality and safety issues
– Non-ethical trading practices and lack of compliance
� Companies will develop supply chain network strategies that attempt to balance resilience and agility
#4 Manufacturing Off shoring Will Continue, But With Lower Growth
To take home
A new balance between off shoring, near shoring and local or in-house manufacturing is needed
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 10
� Moving towards becoming service provider
− Spare parts production and servicing, MRO, financial and leasing services, and reverse logistics processes
� Caution - Managing Services-based Processes Requires a Different Approach
– The value of the service exceeds the spare value
– Low volume and intermittent demand
� Topping the supply chain process improvement agenda
− Put in place new organizational structures
− Misalignment between supply chain strategy and related IT investments
#5 Manufacturers Enhance Capabilities as Providers of Aftermarket Services
To take home
Continued shift in manufacturers’ strategies that transform enterprises from being a traditional product manufacturer towards being a product and service provider
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 11
� Three ways to embrace green supply chain practices:
− Compliance initiatives
− Making standard business practices green
− Thinking out of the box
� The intangible value of green may be in the eye of the beholder, but financial ROI will become increasingly important
– Short term : cost reduction or business efficiency vs. Long term: more sustainable initiatives
– Holistic view in assessing green initiatives impact: from a tangible ROI perspective and an intangible ROI point of view along the supply chain
#6 Green supply chain initiatives will move from compliance to business value creation
To take home
Green as a corporate priority: move beyond compliant as a costlynecessity and consider opportunities to capitalize on green strategies
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 12
� New Product Design and Introduction (NPDI) process is a ‘must have’ and not a ‘nice to have’
− Brings business benefits over competitors
− This requires a combination of product life-cycle processes and supply chain processes
� Cross-fertilization among different industries
– Engineering-oriented industries can start learning from brand-oriented manufacturers about combining NPDI creativity with Supply Chain
� An integrated approach to technology can help
– Despite NPDI importance, most companies do not have a clear process in place
– Fragmentation of IT technology supporting NPDI
#7 Innovation Calls for Product Lifecycle and Supply Chain Management Convergence
To take home
Increase product quality, extend product ranges and enhance product innovation are key factors for company growth
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 13
� RFID brings more agility through improved supply chain visibility
– The beauty of RFID lies in the real-time, automated and virtually error-free data acquisition
� In a manufacturing context RFID, can be used to support a variety of business processes
− Factory shop floor, supply chain, aftermarket service, compliance and sustainability
� Only ROI-focused applications for RFID are emerging
– Investments in RFID will be mainly driven as part of larger initiatives to drive business process optimization
#8 RFID will remain an Emerging Technology unless ROI is proved
To take home
Despite the limited penetration within the European manufacturing industry, some positive signals are emerging from the noise
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 14
� The fuel cost challenge provides a catalyst for innovation
– Adoption of supply chain best practices, extensive use of outsourced logistics services, and implementation of IT solutions
� Increasing emphasis on reducing CO2 emissions
– Calling companies to asses not only financial costs, but also other less tangible costs
� The emergence of Supply Chain Convergence
− The combination of outsourced logistics with other forms of outsourcing, such as IT and supply chain processes outsourcing
#9 Skyrocketing fuel costs will drive more attention to logistics and transportation
To take home
Logistics and transportation costs are rapidly becoming a significant part of total supply chain costs and are expected togrow further
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 15
� DSO (days sales outstanding) is 44 days average
– As supply chains become more complex a negative impact on DSO metrics is possible
� There is a disconnection between supply chain operations and overall financial performance
– Supply chain function that can be seen to be successfully contributing to overall business value creation, are likely benefit by raising their profile particularly in the eyes of CFO
� The market for supporting technologies and services is still young
− A small number of IT vendors and financial institutions have launched IT solutions and services around financial supply chain
#10 Financial Supply Chain Initiatives Begin to Garner Interest
To take home
Getting cash in is key for any manufacturing enterprise. Therefore, a supply chain is not truly optimized until cash flow is completed in sync with physical goods and information flow
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 16
Advice for manufacturing companies
� Increase visibility across your supply network as a way to become more agile
� Do not look at making supply chain performance improvements in isolation from real-time manufacturing and suppliers collaboration
� Sense and shape demand goes hand in hand with supply chain agility
� Integrating Supply Chain with Product Lifecycle processes to take the most out of NPDI
� Green as a corporate priority: move beyond compliant as a costly necessity and consider opportunities to capitalize on green strategies
� Find a new balance between off shoring, near shoring and local or in-house manufacturing is needed
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 17
Advice for IT vendors and ISVs
� Consider there is an increasing demand for factory-related solutions in Europe.
� Supplier relationship management (SRM) applications are on top of IT investment agendas
� Do not oversell the demand-driven nirvana: European manufacturers have relegated this notion, preferring instead to be agile
� Extend your solution coverage and provide NPDI solutions, spanning the areas of SCM and PLM
� Large IT vendors should extend their traditional IT Outsourcing and BPO offering towards supply chain process outsourcing, possibly partnering with or acquiring 3PLs
� European IT vendors should consider stepping on the Euro’s prevalence over the U.S. dollar to acquire smaller U.S. based IT vendors offering complementary technologies
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2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 18
Thank You! Questions?
Pierfrancesco ManentiResearch Director,
Manufacturing Insights,
IDC EMEA
� Manufacturing Insights provides the following research services in EMEA:
– European Supply Chain Strategies
– European Product LifeCycle Strategies
– European CIO Strategies
– European IT Opportunities Manufacturing